ilifornia 

ional 

lity 

• 
1  r 

D66J5c 

• 
11  ilPO 

1  ex 

JO 

UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


COMBINATIONS: 


Their  Uses  and  Abuses, 


WITH    A    IIISTOUY   OK 


The  Standard  Oil  Trust. 


AN  ARGUMENT  RELATIVE  TO  BILLS  PENDING   BEFORE   THE 

NEW  YORK  LEGISLATURE,  BASED  UPON  TESTIMONY 

GIVEN  BEFORE  THE  SENATE  COMMITTEE 

ON  GENERAL  LAWS. 


BY 


S.    C.   T.    DODD, 

Solicitor  of  the  Standard  Oil  Trust. 


GEORGE  F.   NESBITT  &  CO. 
1888 


COMBINATIONS : 


Their  Uses  and  Abuses, 


WITH  A  HISTORY  OF 


The  Standard  Oil  Trust. 


AN  ARGUMENT  RELATIVE  TO  BILLS  PENDING   BEFORE  THE 

NEW  YORK  LEGISLATURE,  BASED  UPON  TESTIMONY 

GIVEN  BEFORE  THE  SENATE  COMMITTEE 

ON  GENERAL  LAWS. 


BY 


S.    C.   T.    DODD, 

Solicitor  of  the  Standard  Oil  Trust. 


Neto  3Torfc: 
GEORGE  F.  NESBITT  &  CO. 


1888. 


T)fe 


STATISTICS   ON   THE   PETEOLEUM    INDUSTRY. 


** 

CRUDE  OIL:   BBLS.  OF  FORTY-TWO  GALLONS. 

Refined 

Total  Value 

On. 

A  -.  i -rage 

of    Petroleum 
and    its    pro- 

Year. 

j  price    per 
gal.  in  bbl, 

ducts,  export- 

ed from  the  C. 

Production. 

Shipment?. 

Stock. 
Close  of  year. 

Price 
at  wells 

for  export 

at  New 

York. 

S.  —  F  i  a  c  a  1 

year      ending 
June  30. 

1861.... 

2,113,600 

1,650,133 

Unknown 

$0.52 

6154C. 

Unknown 

1862.... 

3,056,606 

3,101,571 

<« 

1.00 

3638 

" 

1863.... 

2,611,359 

3,242,951 

•< 

3.11 

4476 

>< 

1864.... 

2,116,182 

1,842,061 

" 

7.85 

6501 

$10,782. 6«9 

1865... 

3,497,712 

2,100,132 

" 

6.65 

5878 

16.563  1  3 

1866.... 

3,597,527 

3,010,921 

" 

3.76 

434  6 

24,830.887 

1867.... 

3,346,306 

2,893,210 

534,000 

2.40 

2841 

24,407,612 

1868.... 

3,715,741 

3,482,510 

264,805 

3.57 

2952 

21,810,676 

1869.... 

4,186,475 

4,255.343 

340,154 

5.64 

32 7S 

31.071,256 

1870.... 

5,308,046 

5,593,168 

537,751 

3.86 

2635 

32,668,960 

1871.... 

5,278,072 

5,667,891 

568,858 

4.42 

242  4 

36,894,310 

1872.... 

6,505,774 

5,899,942 

(1,174,000 ) 

|  Estim't'd J 

1  625,157 

3.96 

2359 

34,058,390 

1873.... 

9,849,508 

9,499,775 

1.73 

1787 

42,050,756 

1874.... 

11,102,114 

8,821,500 

3,705,639 

1.18as 

1298 

41  245,815 

1875.... 

8,948,749 

8,924,938 

2,751,758 

1.2433 

13 

30,078.569 

1876.... 

9,142,940 

9,583,949 

1,926,735 

2.5150 

1916 

32,915,786 

1877.... 

13.052,753 

12,469,644 

2.857,098 

2.3S75 

1544 

01,789,438 

1878. . . . 

15,011.425 

13,750,090 

4,307,590 

1.16 

1076 

46,574,974 

1879.... 

20,085,716 

16,226,586 

8,094,496 

88'  * 

§08 

40,305,249 

1880. . . . 

24,788,950 

15,839,02U 

16.606,344 

9410 

gne 

36,218,625 

1881  ... 

29  674,458 

19,340,021 

25,333,411 

8535 

goi 

40,315,609 

1882.... 

35,789,190 

22,094,209 

34,335,147 

786  7 

rs9 

51,232,706 

1883.... 

24,385,966 

21,967,636 

35,715,565 

1.0581 

gO  2 

44,913,079 

1884.... 

23,596,945 

24,053,902 

36,872,892 

8373 

81S 

47,103,248 

1885.... 

21,600,651 

24,029,424 

33,836,939 

8848 

79  3 

50,257,947 

1886. . . . 

35,854,822 

26,332,445 

33,395,885 

7125 

no  7 

50,199,844 

1887. . . . 

21,818.1):;: 

26,627,191 

28,310,282 

6666 

672 

24  y'rs 

46,824,933 

.$895,115,260 

Statistics  on  Crude  Oil  production,  shipments  and  stocks  are  taken  from  the  Derrick 
Hand  Book,  published  1884  ;  later  statistics  on  crude  oil  taken  from  the  pub- 
lished reports  of  the  National  Transit  Co. 

Prices  of  crude  and  refined  are  averages  of  the  published  daily  market  prices. 

Value  of  exports  taken  from  the  published  reports  of  the  Statistical  Bureau  of  the 
Treasury  Department,  Washington,  D.  C. 


USES  AND  ABUSES  OF  COMBINATIONS. 

When  an  unfortunate  orator,  solely  for  alliteration's  sake,  spoke 
of  "Rum,  Romanism  and  Rebellion"  as  closely  related,  he  made 
a  great  mistake.  Just  as  great  a  mistake  is  made  when  we  unite 
the  terms  "  Combination  and  Monopoly."  There  is,  in  fact,  no 
necessary  relation  between  them.  The  wonderful  success  of 
modern  business  is  dependent  upon  combination.  It  is  as  much 
a  necessity  of  trade  and  commerce  as  steam  and  machinery.  By 
combination  capital  is  obtained,  enterprises  of  magnitude  con- 
ducted, great  results  accomplished.  By  combination  small  capi- 
talists can  successfully  compete  with  large  capital.  Every  part- 
nership is  a  combination.  Every  corporation  is  a  combination. 
Destroy  the  right  to  combine  and  business  on  a  large  scale  be- 
comes at  once  impossible.  Unity  of  action  would  be  destroyed. 
Our  railroads  would  be  eaten  with  rust.  Our  ships  would  rot  in 
their  harbors.  Our  warehouses  would  decay.  Mankind  would 
become  segregated  as  savages,  each  acting  for  himself  alone  and 
endeavoring  to  destroy  others.  Surely  people  do  not  stop  to 
think  what  they  mean  when  they  utter  their  wild  cries  against 
combinations. 

Possibly  some  combinations  are  monopolies,  but  monopoly 
does  not  necessarily  arise  from  combination.  A  monopoly  can 
be  held  by  a  single  person  as  well  as  by  a  combination  of  many 
persons. 

A  monopoly  is  a  grant  by  the  Government  for  the  sole  buying, 
working,  making  or  using  of  anything.  Less  than  a  century  ago 
the  right  to  labor  was  to  a  great  extent  a  privilege  which  the 
Sovereign  might  rightfully  sell  to  his  subjects.  In  those  days, 
it  has  been  said,  the  prying  eye  of  the  Government  followed  the 
butcher  to  the  shambles  and  the  baker  to  the  oven.  The  peasant 
could  not  grind  his  corn  in  his  own  mill,  nor  sharpen  his  tools 
on  his  own  grindstone,  nor  make  his  oil,  wine  nor  cider  at  his 
own  press.  Those  natural  rights  and  liberties  which  belong  to 
every   individual  were  taken  from  him  and  sold  as  exclusive 


privileges  to  favored  creatures  of  Government.  No  wonder  that 
the  term  became  one  of  odium,  and  that  it  still  remains  a  term  of 
reproach.  Let  it  not  be  forgotten,  however,  that  the  struggle 
against  monopoly  ever  has  been,  and  ever  will  be,  a  struggle 
against  interference  in  business  by  government. 

But  it  is  by  no  means  true  that  every  monopoly  is  an  unmiti- 
gated evil.  Many  exist  at  this  day  which  are  admitted  by 
jurists,  statesmen  and  economists  to  be  among  our  greatest  bless- 
ings. Every  grant  of  a  patent  right  is  a  monopoly.  Every  grant 
of  an  exclusive  right  is  a  monopoly.  Our  railroads,  gas  com- 
panies and  water  companies,  in  so  far  as  they  possess  exclusive 
privileges,  are  monopolies.  Yet  no  one  but  a  socialist  or  an  anar- 
chist would  deprive  the  people  of  them  or  of  the  blessings  they 
have  conferred.  I,  however,  am  willing  to  admit  that  entirely  too 
many  of  them  exist.  The  greatest  stride  in  law  reform  that  has 
been  made  in  this  country  in  the  last  twenty  years,  consists  in 
placing  in  so  many  of  our  State  Constitutions  the  provision  that 
no  special  or  exclusive  privileges  shall  be  granted. 

Combinations  of  capital  and  of  persons,  whether  as  partner- 
ships, associations  or  corporations,  without  any  grant  of  exclu- 
sive privileges,  are  in  no  sense  of  the  word,  monopolies. 

Without  combination,  without  partnerships,  without  joint 
stock  associations,  without  corporations,  the  business  of  the 
world  would  stagnate.  They  are  as  indispensible  to  the  manu- 
factures and  commerce  of  this  nineteenth  century  as  the  air  is 
to  our  existence.  It  may  be  a  surprising  statement,  but  it  is 
true,  that  all  the  evils  of  the  old  monopolistic  system  that  have 
survived  to  this  day  exist  in  consequence  of  the  restrictions 
which  have  been  placed  by  law  upon  freedom  of  combination. 

The  greatest  step  forward  which  has  been  made  in  jurispru- 
dence in  the  last  half  centurj,  has  been  in  the  partial  removing 
of  restrictions  upon  combination.  And  the  greatest  blessings 
that  legislation  can  confer  upon  commerce  and  manufactures,  is 
to  leave  the  right  of  combination  entirely  unrestricted,  while  it 
directs  careful  attention  to  the  prevention  of  such  evils  as  com- 
binations may  be  found  to  give  rise  to  or  to  foster.  Combination 
is  a  power  for  good.  It  may  also  be  a  power  for  evil.  The 
power  must  not  be  destroyed ;  it  must  be  regulated. 


I  wish  to  go  back  a  little  to  prove  my  assertion  that  freedom  of 
combination  renders  monopoly  impossible.  Less  than  half  a 
century  ago  the  natural  right  of  the  British  people  to  combine 
for  trading  in  any  manner  except  as  partners  was  denied,  and  the 
issuing  of  a  transferable  stock  without  special  legal  authority 
was  an  illegal  offense.  For  this  reason  the  few  corporations 
which  weie  created  by  Parliament  held  exclusive  franchises  and 
were,  therefore,  monopolies.  I  go  further  and  say  that  the  right 
thus  to  combine  was  denied  to  the  people  in  order  that  the  few 
upon  whom  this  privilege  was  conferred  should  hold  a  monopoly. 
We  brought  our  laws  and  customs  upon  this  subject  from  Eng- 
land, and  until  within  a  very  few  years  in  most  of  the  States  of 
this  Union  freedom  of  combination  was  denied,  and  the  right 
was  granted  by  special  legislative  acts  to  those  who  were  political 
favorites  or  who  were  able  to  purchase  special  privileges.  Those 
were  the  days  of  monopolies.  Some  of  the  Eastern  States,  nota- 
bly Massachusetts  and  Rhode  Island,  long  ago  freed  themselves 
from  this  error,  and  allowed  all  persons  freely  to  combine  for 
manufacturing,  mining  or  mercantile  purposes.  The  consequence 
was  an  era  of  prosperity  in  those  States  in  marked  contrast  to  the 
condition  of  the  States  whose  laws  forbade  such  combination. 
In  no. State  did  capital  reap  a  better  profit  and  labor  a  richer 
reward.  The  laborer  was  thus  enabled  to  invest  his  small  accu- 
mulations in  the  business  in  which  he  was  employed.  Not  until 
1856  did  England  free  itself  from  the  shackles  it  had  placed  upon 
its  own 'industries  and  permit  free  combinations  of  persons  and 
capital.  Since  that  date  any  seven  or  more  persons  may  combine 
in  any  lawful  business  by  simply  filing  and  registering  a  state- 
ment of  their  intent.  Other  States  have  been  slow  in  following 
the  lead  of  the  New  England  States.  But  within  the  last  ten  or 
fifteen  years  it  has  become  evident  to  all  legislators  that  the  best 
mode  by  which  the  monopolistic  features  of  corporations  or  other 
combinations  might  be  eradicated  was  to  make  the  right  of  com- 
bination perfectly  free  to  all.  To-day  there  is  scarcely  a  State  in 
this  Union  in  which  any  three  or  three  thousand  persons  may  not 
combine  their  capital,  be  it  small  or  great,  in  any  lawful  business 
enterprise. 

In  New  York  manufacturing  corporations  may  be  thus  formecj 


without  limit  of  capital,  and  the  corporations  thus  formed  can 
combine  at  pleasure.  The  franchise  to  be  a  corporation,  the 
right  to  combine,  is  no  longer  sold  or  granted  as  a  favor.  Cor- 
porations are  no  longer  created  by  special  but  by  general  laws. 
Franchises  are  no  longer  exclusive  and  indestructible  privileges. 
They  are  general,  and  may  be  recalled  at  will  by  the  power 
which  granted  them.  As  a  consequence,  corporations  are  now 
simply  business  partnerships  with  transferable  shares.  The  law 
recognizes  them  as  such.  In  the  late  case  of  Diamond  Match 
Company  vs.  Eoeber,  106  N.  Y.,  473,  the  Court  of  Appeals  of 
New  York  says : 

"  The  laws  no  longer  favor  the  granting  of  exclusive  privi- 
leges, and,  to  a  great  extent,  business  corporations  are  practically 
partnerships,  and  may  be  organized  by  any  persons  who  desire 
to  unite  their  capital  or  skill  in  business,  leaving  a  free  field  to 
all  others  who  desire  for  the  same  or  similar  purpose  to  clothe 
themselves  with  a  corporate  character." 

This  change  has  been  slowly  wrought  in  our  laws,  because  all 
legal  changes  are  slow.     It  was  forced  by  the  very  necessities  of 
business.     When  business  is  small  and  local  it  is  carried  on  in  a 
small  way  by  individuals.     When  business  ceases  to  be  localized 
in  a  village  or  a  city,  when  it  is  no  longer  confined  by  state  lines, 
when  the  producer  or  manufacturer  has  the  world  for  his  market, 
the  business  must  increase  with  the  growing  demand,  capital  must 
be  supplied  in  increased  quantities,  every  appliance  which  will 
cheapen  cost  of  manufacture  and  transportation  must  be  utilized, 
combinations  on  a  large  and  larger  scale  are  absolutely  essential. 
Political  economists  recognized  this  necessity  long  before  it 
was  adopted  by  our   law-makers.     John  Stuart  Mill,  (Political 
Economy,  vol.  I,  p.  189,)  says,  "  when  markets  are  large,  and  a 
large  opening  for  exportation,  large  systems  of  business  are  effec- 
tive.    Large  establishments  are  substituted  for  small  ones.     This 
change  from  small  to  large  is  wholly  beneficial.     It  may  have 
some  drawbacks,  but  when  once  the  system  of  large  establish- 
ments is  established,  the  change  from  large  to  larger  systems  is 
an  unqualified  benefit."     Again,  p.  510>  "The  progress  of  the 
productive  arts  requiring  that  many  sorts  of  industrial  occupa- 
tions should  be  carried  on  by  large  and  larger  capitals,  the  pro- 


ductive  power  of  industry  must  suffer  by  whatever  impedes  the 
formation  of  large  capitals  through  the  aggregation  of  smaller 
ones." 

He  further  contends  that  the  only  hope  of  breaking  up  the 
separation  of  mankind  into  employer  and  emploj'ed  and  giving 
the  employed  an  interest  in  the  business,  is  in  the  extension  of 
the  combination  or  partnership  principle,  and  urges  that  all  legal 
obstacles  to  combination  should  be  taken  away. 

I  shall  never  forget  the  eloquence  and  learning  with  which 
this  theory  was  advocated  by  the  venerable  Henry  C.  Carey,  in 
the  Constitutional  Convention  of  Pennsylvania,  in  1873.  A 
synopsis  of  his  views  will  be  found  in  vol.  5,  p.  477,  of  the  de- 
bates of  that  body.  He  proved  by  history,  experience  and 
reason  that  "  the  more  perfect  the  power  of  association,  the 
greater  the  power  of  production  and  the  larger  the  proportion  of 
the  product  which  falls  to  the  laborers'  share."  He  urged  that 
the  constitution  should  provide  that  any  three  or  more  persons 
might  associate  as  a  corporation  for  any  lawful  purpose.  The 
provision  was  not  put  in  the  Constitution,  but  the  Legislature  of 
that  State  adopted  it  in  effect  at  its  next  session. 

Surely  we  are  in  line  with  the  best  thinkers  of  the  age  when 
we  conclude  with  Prof.  Sumner  in  his  work,  "  What  Social 
Classes  owe  to  Each  Other,"  page  55 :  "  There  is  every  indication 
that  we  are  to  see  new  developments  of  the  power  of  aggregated 
capital  to  serve  civilization,  and  that  the  new  developments  will 
be  made  right  here  in  America.  Joint  stock  companies  are  yet 
in  their  infancy ;  and  incorporated  capital,  instead  of  being  a 
thing  which  can  be  overturned,  is  a  thing  which  is  becoming  more 
and  more  indispensible."  *  *  *  "  Aggregated  capital  will  be 
more  and  more  essential  to  the  performance  of  our  social  tasks." 
*  *  *  « This  tendency  is  in  the  public  interest."  *  *  * 
"  We  are  to  see  the  development  of  the  country  pushed  forward  at 
an  unprecedented  rate  by  an  aggregation  of  capital,  and  a  sys- 
tematic application  of  it  under  the  direction  of  competent  men. 
This  development  will  be  for  the  benefit  of  all." 

But  is  combination  an  unmixed  blessing?  No  one  pretends 
that  it  is.  It  is  attended  with,  or  may  give  rise  to,  greater  or 
less  evils,  and  it  is  the  duty  of  legislators  and  judicial  law  makers 


10 

to  keep  a  watchful  eye  upon,  and  to  repress  the  evils.  Every 
force  is  a  blessing,  although  it  may  be  used  for  evil  as  well  as  for 
good.  We  do  not  abolish  guns  because  they  are  the  instruments 
of  murder.  We  do  not  prohibit  the  manufacture  of  dynamite 
because  it  is  used  by  anarchists.  We  use  steam  notwithstanding 
its  dangerous  qualities.  To  talk  of  preventing  combinations  is 
childish  and  futile.  To  pass  laws  which  will  prevent  them  from 
accomplishing  bad  results  is  the  most  important  purpose  to 
which  the  legislative  mind  can  be  directed. 

The  usual  charge  against  combination  is  that  it  destroys  com- 
petition. "  Where  combination  is  possible  competition  is  impos- 
sible," was  once  uttered  by  a  wise  man,  and  thousands  re-utter 
it  utterly  regardless  of  its  correct  application.  It  was  said  by 
George  Stephenson  with  regard  to  railroads  which  have  exclusive 
privileges,  and  are,  to  that  extent,  monopolies.  As  competition 
is  necessarily  confined  to  two  or  three  companies,  combination 
among  them  certainly  may  destroy  competition.  The  saying 
has  been  applied  to  all  kinds  of  business,  utterly  forgetful  of  the 
fact  that  no  business  is  carried  on  without  combination,  and  the 
greater  the  business  the  greater  necessarily  the  combination. 
Competition  is  not  thereby  destroyed.  It  is  simply  carried  on 
on  a  higher  plane.  The  man  who  transports  on  a  wheelbarrow 
o-ives  way,  it  is  true,  to  the  man  who  transports  on  a  wagon. 
But  wagoners  compete.  The  individual  with  small  capital  gives 
way  to  aggregated  capital.  But  the  individual  unites  his  capital 
with  others,  and  the  aggregations  compete.  The  business  is  in 
consequence  done  better  and  more  cheaply.  The  profits  are 
possibly  larger.  The  public,  however,  is  benefitted  by  a  better 
and  cheaper  product. 

Competition  which  is  beneficial  is  not  a  fierce  strife  between 
persons  each  to  undersell  the  other,  carried  to  the  furthest  ex- 
treme withoui  co-operation  or  compromise.  This  would  be  a  fit 
mode  for  savages,  not  for  civilized  men. 

The  beneficial  effect  of  competition  is  undoubtedly  to  furnish 
the  public  the  best  material  at  the  lowest  price,  but  that  is 
neither  accomplished  by  mere  blind  cutting-under  in  prices  nor 
is  it  prevented  by  reasonable  understandings,  arrangements  or 
agreements  in  reference  to  prices,     The  business  of  the  world 


11 

could  not  be  carried  on  if  producers  or  sellers  of  commodities 
could  have  no  understanding  between  themselves  as  to  prices. 
The  competitor  who  begins  by  cutting  prices  below  what  his 
neighbors  and  himself  can  profitably  sell  at,  does  so  only  to  crush 
them  out  that  he  may  afterwards  sell  higher.  Such  competition  is 
neither  honorable  nor  of  ultimate  benefit  to  the  public.  It  is  of 
public  benefit  that  all  dealers  should  obtain  fair  profits.  But  the 
public  demands,  and  this  is  what  a  beneficial  competition  accom- 
plishes, that  business  be  so  conducted  that  the  public  shall  get  the 
best  products  at  the  least  cost.  This  is  not  done  by  selling  below 
cost,  but  by  reducing  the  cost  of  producing,  manufacturing  and 
transporting  in  every  possible  way.  Only  the  competitor  who  does 
this  is  a  public  benefactor.  He  is  the  man  who  buys  the  best  tools 
;it  any  cost;  who  advances  from  the  old  coulter  and  beam  plough 
through  all  the  improvements  to  the  steam  plough;  who  abandons 
the  sickle  for  the  cradle,  and  the  cradle  for  the  reaper;  the  man, 
in  fact,  who  makes  two  blades  of  grass  grow  where  one  grew  be- 
1  a  competitor  benefits  the  public,  and  the  man  who, 
unable  to  advance,  plodding  on  in  the  ways  of  his  forefathers,  asks 
for  legislation  to  protect  him  against  his  progressive  neighbor 
whom  he  stigmatizes  as  a  capitalist,  is  entitled  to  pity,  but  can 
only  be  helped  at  public  expense. 

It  seems  to  be  a  favorite  modern  notion  that  any  advance  in 
methods  of  business  by  which  the  poorest  competitor  is  injured  is 
contrary  to  public  policy.  If  this  were  true  the  public  would 
derive  no  advantages  from  competition.  The  foremost  in  the  race 
would  be  forced  to  wait  for  the  hindmost  to  catch  up.  The  rule  in 
business  is  emphatically  the  survival  of  the  fittest.  Only  thus  can 
the  public  receive  benefit  from  superior  skill  and  economies  in 
less.  Competition  crushes  out  competitors  but  does  not  de- 
stroy competition  so  long  as  all  have  the  right  to  compete. 

Those  methods  of  business  are  correct  and  legal  which  sub- 
greatest  good  of  the  greatest  number.  To  this  end 
unrestricted  competition  is  absolutely  necessary  and  so  is  un- 
restricted combination.  The  two  are  by  no  means  irreconcilable. 
To  illustrate,  Prof.  Had  ley,  in  his  work  on  "Railroad  Transpor- 
tation,"'  asserts  that  competition  carried  to  its  utmost  limits  must 
always  end  in  disaster  and  bankruptcy  to  the  trades  and  injury 


12 

to  the  public.  Hudson,  in  "  Railways  and  the  Republic,"  refutes 
this  view  and  contends  that  public  benefit  is  derived  from 
competition  alone.  Both  of  them  are  right  if  their  definitions  of 
what  competition  is  are  accepted.  Hudson  says  competition  is 
not  merely  a  strife  to  undersell  at  all  hazards,  but  that  "  the  true 
purpose  of  competition  is  to  secure  patronage  by  doing  more  for  the 
same  money  than  any  rival."  And  again,  "  competition  seeks  to  in- 
crease profits  by  enlarging  the  volume  of  transactions  so  that  a  small 
profit  shall  yield  greater  returns  on  a  large  volume  of  business,  than 
a  large  profit  on  a  small  volume  of  business." 

Could  language  be  used  more  apt  to  describe  what  combina- 
tion is  necessary  to  accomplish? 

Competition  carried  on  in  these  methods  for  these  purposes 
must  stop  long  before  its  legitimate  results  are  reached,  unless 
combination  of  persons  and  capital  to  carry  on  the  business  is 
permitted.  And  when  it  is  permitted  con: petition  is  not  de- 
stroyed. All  are  free  to  combine  and  thus  c<  mpetition  is  moved 
to  a  higher  plane,  the  fittest  survive,  and  the  public  is  benefitted 
by  the  best  and  cheapest  service.  To  prevei  t  combination  is  to 
reduce  competition  to  the  primitive  methods  carried  on  between 
individuals  engaged  in  local  trade.  It  is  to  put  trade  in  fetters 
and  enclose  it  within  narrow  walls.  It  gives  small  capitalists  no 
chance  to  combine  and  compete  with  large  capitalists.  Unre- 
stricted competition  and  unrestricted  combin  uion  is  the  true  law 
of  trade. 

No  matter  how  humble  the  start  in  trade  may  be, 
competitively  with  the  motive  of  doing  more  for  the  same  mone) 
than  any  rival,  and  enlarging  the  volume  to  decrease  tl 
it  grows  in  magnitude,  it  overlaps  boundar 
State,  the  Nation,  the  World.     It  has  all  markets  i 
It  combines  capital,  it  engages  skilled  persons,  it 
factory,  it  uses  every  device  that  cheapens  its  product,  it  invents 
new  machinery  and  new  products,  it  cheaper-   transports 
builds  ships,  it  becomes  a  grand  aggregation 
combination  of  business.     It  gives  the  public  froi     year  to  year  i 
better  and  cheaper  product.     At  what  point  in  this  desired  and 
beneficial  result  of  competition  will  you  lay  your  hands  upon  it 
and  bid  it  stop?     Will  you  praise  those  who  build  up  a  business 


13 

one  hundred  thousand  dollars,  and  execrate  those  who  build 
p  a  business  of  millions?  Think  of  those  who  used  to  burn 
achinery;  think  of  those  who  tore  up  railroad  tracks  because 

I  ie  trade  by  wagons  was  endangered,  and  avoid  their  follies. 
1  hink  of  those  who  believe  all  accumulation  of  capital  is  a  crime, 
id  hesitate  long  before  legislating  to  suit  their  views.  Because 
I  usiness  grows  greater  than  our  small  notions,  do  not  try  to  sup- 
I  ress  it.  The  future  will  show  us  business  on  a  larger  scale  than 
v  e  yet  dream,  and  the  world  will  benefit  by  it. 

It  is  further  assumed,  in  all  attacks  upon  combinations,  that 
I  leir  purpose  and  end  is  to  reduce  supplies  and  increase  prices, 
or  in  some  similar  way  to  injure  the  public. 

There  is  no  charge  made  against  combinations  which  has  so 

ittle  foundation  as  this.  So  far  from  being  the  truth  it  is 
'  ie  very  reverse  of  the  truth.  All  that  I  have  heretofore  said 
and  quoted  from  well  known  authors  in  Political  Economy  is  in 
direct  opposition  to  this  statement.  We  are  not  dependent  here 
on  theories.  Take  the  statistics  of  any  important  business  for 
the  past  fifteen  years  and  it  will  be  found  that  the  effect  of  large 
■  ombinations  has  been  to  increase  trade,  to  decrease  prices  and 
to  benefit  the  public.     I  quote  the  following  from  Gunton,  a 

Titer  on  Political  Economy  : 
"  If  it  is  true  that  the  concentration  of  capital  tends  to  diminish 
t  ie  cost  of  production  and  intensify  competition,  it  follows  that 
1  rices  will  fall  or  wages  will  rise,  or  both,  in  proportion  as  large 
enterprises  supplant  small  ones.  And  this  is  what  all  industrial 
I  istory  shows  has  taken  place.  Take  for  example  the  cotton  indus- 
try  in  this  country.  In  1831  there  were  801  cotton  manufacturing 
.  stablishments  with  an  average  capital  of  $50,702  each.  The 
ratio  of  cloth  produced  to  dollars  invested  was  1.48  lbs  to  $1 ; 
'  he  ratio  of  pounds  produced  to  persons  employed  was  950.75  to  1 ; 
■'.ie  ratio  of  capital  to  spindles  employed  was  $32.58  to  1;  the 
ratio  of  spindles  to  persons  employed  was  22  to  1 ;  the  ratio  of 

tounds  produced  to  spindles  employed  was  47.74  to  1 ;  and  the 
:atio  of  consumption   of  cotton    cloth    to   population  was  5.90 

rounds  to  1,  and  the  price  of  cotton  cloth  17  cents  per  yard.     In 

880,  the  number  of  establishments  had  fallen  to  756.     The  aver- 

ge  amount  of  capital  invested  in  establishments  had  risen  from 


14 

$50,702  to  $275,503;  the  ratio  of  pounds  produced  to  dollars  in- 
vested, to  2.45  lbs.  to  $1;  the  ratio  of  pounds  of  product  to  per- 
sons employed,  to  3,519.40  lbs.  to  1  ;  the  ratio  of  spindles  to 
persons  employed,  to  62  to  1 ;  the  ratio  of  capital  to  spindles,  to 
$19.55  to  1 ;  the  ratio  of  pounds  of  product  to  spindles,  to  57 
lbs.  to  1  ;  the  ratio  of  consumption  of  cotton  cloth  to  the  popu- 
lation was  13.91  lbs.  to  1,  and  the  price  of  cotton  cloth  was  7 
cents  per  yard,  and  wages  were  80  per  cent,  higher.  It  will  thus 
be  seen  that,  comparing  1880  with  1831,  the  capital  invested  per 
spindle  was  over  one-third  less,  the  number  of  spindles  operated 
by  each  laborer  nearly  three  times  as  large,  the  product  per 
spindle  one-fourth  greater,  the  product  per  dollar  invested  twice 
as  large,  the  product  per  laborer  employed  nearly  four  times  as 
great,  the  price  of  cotton  cloth  60  per  cent,  less,  wages  80  per 
cent,  higher,  and  the  consumption  of  cotton  cloth  per  capita  oi 
the  population  over  100  per  cent,  greater.  These  are  the  results 
of  the  process  of  consolidation  into  large  capitals  extending  ovet 
half  a  century.  What  is  true  of  this  industry  is  equally  true  of 
all  industries,  in  proportion  as  the  concentration  of  capital  has 
increased." 

What  is  here  said  of  the  cotton  business  is  true  of  all  branches 
of  business.  The  last  fifteen  years  has  been  an  era  of  combina- 
tion in  business,  it  has  also  been  an  era  of  lower  prices.  What 
ever  else  may  be  said  of  combinations  of  railroads,  combination? 
of  telegraph  lines,  combinations  of  manufacturing  companies,  sta- 
tistics will  show  that  increased  trade  and  lower  prices  follow  as 
an  almost  inevitable  result.  If  there  are  exceptions  they  serve 
but  to  prove  the  rule.  I  shall  show  hereafter  that  so  far  from  the 
Standard  combination  being  an  exception,  it  can  exhibit  an  in 
creased  trade  and  reduction  in  prices,  as  the  direct  result  of  com- 
bination, to  an  unprecedented  extent. 

When  I  speak  of  unrestricted  combinations  I  do  not  mean  that 
combinations  should  be  allowed  under  all  circumstances  and  for 
all  purposes.  While  combination  is  not,  per  se,  evil,  its  purpose 
may  be.  The  law  is  possibly  our  best  guide  on  this  subject.  It 
has  progressed  as  experience  and  the  necessities  of  business  required 
it  to  progress,  from  the  idea  that  all  combinations  were  wrong  to 
the  idea  that  all  persons  should  be  left  free  to  combine  for  all  legiti- 


15 

mate  purposes.     To  this  day,  however,  the  law  is  properly  very 
jealous  of  certain  classes  of  combinations,  such  as 

1st.  Where  the  parties  combining  exercise  a  public  employ- 
ment, or  possess  exclusive  privileges,  and  are  to  that 
extent  monopolies. 

2nd.  Where  the  purpose  and  effect  of  the  combination  is  to 
''  corner  "  any  article  necessary  to  the  public. 

3rd.  Where  the  purpose  and  effect  of  the  combination  is  to 
limit  production,  and  thereby  to  unduly  enhance  prices. 

These  things  are  illegal,  and  properly  so.  The  mistakes  of 
writers  on  trusts  and  combinations  consists  in  assuming  that  all 
combinations  are  for  such  purposes,  whereas  the  purpose  and 
effect  of  most  combinations  is  just  the  reverse  of  this,  namely, 
to  lessen  the  cost  of  production,  increase  the  amount  of  con- 
sumption, and  distance  competitors  by  selling  at  less  prices. 
The  differences  between  the  assumed  and  the  real  purpose  and 
effect  is  as  great  as  between  using  dynamite  in  constructing 
public  improvements  and  using  it  ia  destroying  property. 

Time  would  not  permit  me  to  review  the  cases  laying  down 
the  law  on  the  subject  of  combinations  for  illegal  purposes. 
Those,  and  they  are  the  majority,  relating  to  railroads  and  public 
carriers,  are  not  pertinent  to  the  case.  All  the  others,  including 
the  well  known  Coal  cases  and  the  Salt  cases,  were  arrangements 
with  the  direct  and  avowed  purpose  of  destroying  all  competition, 
diminishing  supplies  and  raising  prices. 

These  things  are  just  as  unlawful  without  combination  as  with 
it.  In  other  words,  the  evil  is  not  in  combination  but  in  its 
purposes  and  results. 

And  let  it  be  noted  here  that  where  the  law  speaks  of  agree- 
ments destroying  competition  it  does  not  refer  to  the  fact  that 
competition  between  those  who  associate  is  thereby  destroyed, 
for  if  this  were  illegal  two  persons  could  not  enter  into  partner- 
ship. It  condemns  any  arrangement  the  purpose  or  necessary  ten- 
dency of  which  is  to  destroy  all  competition  and  thus  to  prejudice 
the  public. 


Id 

So  far  from  condemning  all  combinations  which  may  effect 
competition,  the  law  favors  combinations  the  object  and  tendency 
of  which  is  to  lessen  the  cost  of  production  and  prices  to  the 
public. 

Judge  Gibson  is  correctly  quoted  in  Mr.  Crain's  printed  brief 
as  saying,  in  Com.  vs.  Carlisle:  "A  combination  is  criminal 
whenever  the  act  to  be  done  has  a  necessary  tendency  to  prejudice 
the  public  or  to  oppress  individuals  by  unjustly  subjecting  them 
to  the  power  of  the  confederates,  and  giving  effect  to  the  purpose 
of  the  latter  whether  of  extortion  or  of  mischief."  You  will  notice 
that  it  is  not  the  combination,  but  the  purpose  of  extortion  and 
mischief,  and  the  necessary  tendency  to  prejudice  the  public,  that 
is  criminal.     Judge  Gibson,  in  the  same  case,  also  says  : 

"  The  combination  of  capital  for  purposes  of  commerce,  or  to 
carry  on  any  other  branch  of  industry,  although  it  may  in  its 
consequences  indirectly  operate  on  third  persons  *  *  *  is  a 
common  means  in  the  ordinary  course  of  human  affairs  which 
stimulates  to  competition,  and  enables  men  to  engage  in  under- 
takings too  weighty  for  an  individual."  I  wish  you  to  mark,  that, 
in  the  opinion  of  the  greatest  Judge  who  ever  adorned  the  Bench 
of  Pennsylvania  suchcombinations  stimulate  to  competition. 

The  same  view  is  expressed  by  another  learned  Court  in  this 
way:  "Associations  are  so  common  an  element,  not  only  to  com- 
merce, but  to  all  affairs  of  life,  that  it  would  be  rather  perilous 
on  the  part  of  the  Court  to  assert  that  they  impair  competition, 
destroy  emulation,  and  diminish  exertion.  There  is  scarcely  an 
occupation  in  life,  scarcely  a  branch  of  trade,  from  the  very 
largest  to  the  smallest,  that  does  not  feel  the  exciting  and  invig- 
orating influence  of  this  wonderful  instrumentality.  It  made  and 
conducts  our  government,  constructs  our  railroads,  our  steam 
vessels,  our  magnificent  ships,  our  temples  of  worship,  structures 
for  public  and  private  use,  our  manufactories,  creates  our  institu- 
tions for  learning,  builds  up  our  cities  and  towns.  Its  very  office 
is  to  do  what  individual  exertion  may  not  accomplish,  and  in  a 
degree  distinguishes  civilized  from  savage  life." 

I  am  well  aware  that  many  old  authorities  can  be  found  to  the 
effect  that  any  combination  is  illegal,  and  doctrines  to  the  same 
effect   may    occasionally  be    found  in  the  opinions  of    modern 


17 

Judges,  who,  incapable  of  learning  anything  new,  are  not  aware 
that  the  world  has  moved  in  the  last  century.  As  remarked 
before,  less  than  a  century  ago  the  iron  hand  of  the  Government 
was  upon  all  business.  Not  only  combination  in  business  but  a 
great  portion  of  that  which  to-day  constitutes  business,  was  pro- 
hibited, unless  specially  allowed  by  the  Government.  It  was  a 
crime  for  workingmen  to  combine  to  raise  their  wages.  It  was  a 
crime  to  buy  in  one  market  to  sell  at  a  greater  price  in  another. 
It  was  a  crime  to  purchase  produce  on  its  way  to  market.  It 
was  a  crime  to  export  certain  commodities.  Some  of  the  bills 
presented  here,  and  some  of  the  arguments  in  their  advocacy 
would  have  you  forget  all  that  has  been  learned  for  a  century 
and  adopt  the  laws  of  an  age  when  business  in  its  modern  sense 
was  unknown  ;  when  the  iron  hand  of  Government  not  only 
controlled  but  paralyzed  trade ;  when  workingmen  were  slaves 
prohibited  from  acting  together  for  their  own  benefit ;  when  the 
leaders  of  political  combinations  which  undertook  to  influence 
legislation,  whether  wisely  or  unwisely,  were  beheaded  as  traitors. 
Before  doing  so,  contemplate  what  such  a  thinker  as  Buckle, 
Vol.  I.,  p.  277,  says  of  those  old  laws  :  "  Every  European  Gov- 
ernment which  has  legislated  respecting  trade  has  acted  as  if  its 
main  object  were  to  suppress  the  trade  and  ruin  the  traders. 
Instead  of  leaving  the  national  industry  to  take  its  own  course  it 
has  been  troubled  by  an  interminable  series  of  regulations,  all 
intended  for  its  good,  and  all  inflicting  serious  harm.  To  such  a 
height  has  this  been  carried,  that  the  commercial  reforms  which 
have  distinguished  England  during  the  last  twenty  years,  have 
solely  consisted  in  undoing  this  mischievous  and  intrusive  legis- 
lati  n.  It  is  no  exaggeration  to  say,  that  the  history  of  the  com- 
mercial legislation  of  Europe  presents  every  possible  contrivance 
for  hampering  the  energies  of  commerce.  In  every  quarter  and 
at  every  moment,  the  hand  of  Government  was  felt.  Bounties 
to  raise  up  a  losing  trade,  and  taxes  to  pull  down  a  remunerative 
one,  this  branch  of  industry  forbidden,  and  that  branch  of  industry 
encouraged.  Laws  to  regulate  wages  ;  laws  to  regulate  prices ; 
laws  to  regulate  profits,  interference  with  markets,  interference 
with  manufactories,  interference  with  machinery,  interference 
even  with  shops." 
2 


18 

Gentlemen,  legislation  has  made  some  progress  backwards  the 
last  few  years.     Is  it  not  time  to  call  a  halt? 

No  Legislature  can  interfere  with  freedom  of  combination 
for  legitimate  purposes  without  striking  trade  and  commerce 
prostrate  at  its  feet.  If  you  enact,  as  certain  bills  before  you 
would  have  you  enact,  that  no  two  men  can  agree  on  the  price  at 
which  they  will  sell  any  article,  or  that  two  individuals  cannot 
agree  to  cease  competing  in  sales,  or  that  no  combination  which 
affects  prices  shall  be  legal,  you  destroy  not  only  all  partnerships, 
all  corporations,  all  aggregations  of  capital,  all  unity  of  effort  in 
business,  all  compromises  by  which  the  disasters  of  over-com- 
petition are  frequently  averted,  but  you  simply  render  business 
impossible.  Your  Act  should  be  entitled  "an  Act  to  effectually 
prevent  Trade  and  Commerce." 

A  word  further  as  to  associations  of  great  magnitude.  I  have 
said  the  magnitude  must  correspond  with  the  market.  A  small 
association  may  temporarily  diminish  competition  in  a  small  trade. 
The  agreement  of  two  grocers  in  a  country  village  may  fix  prices 
for  that  village.  Will  competition  be  thereby  destroyed  ?  By 
no  means,  for  the  field  is  open  to  any  comer,  and  if  prices  are  fixed 
too  high  buyers  will  seek  a  new  market,  or  a  third  grocer  will 
come  in.  In  a  city  the  rule  is  the  same.  The  business  must  be 
enlarged  to  meet  the  enlarged  market.  Great  combinations  may 
take  place.  They  do  not,  however,  affect  the  market  as  much  as 
the  agreement  of  the  two  grocers  in  a  country  village  affects  their 
market.  The  field  is  open  to  all  comers,  large  or  small.  Arbi- 
trary prices  will  simply  invite  new  capital. 

When  the  world  is  the  market  the  business  must  be  on  equal 
magnitude.  Associated  capital  on  a  corresponding  scale  is  re- 
quired. Still  the  field  is  open  to  all  comers.  New  and  again 
new  manufactories  may  be  drawn  into  the  association.  No 
monopoly  is  created,  for  new  ones  spring  up  to  take  their  places. 
Prices  must  be  kept  at  the  lowest  possible  point  to  keep  new  capi- 
tal from  the  field.  Combinations  controlling  millions  of  dollars, 
with  the  world  for  a  market,  do  not  have  half  the  influence  in 
controlling  that  market  that  the  formation  of  a  partnership  by 
two  grocers  has  on  the  market  of  a  country  town. 

I  repeat  again,  because  it  is  a  principle  that  seems  to  be  lost 


19 

sight  of,  that  the  right  of  association  must  be  free,  that  the  mag- 
nitude of  associations  must  correspond  with,  the  magnitude  of 
the  business  to  be  done,  that  business  cannot  be  localized,  that  it 
cannot  be  confined  by  State  lines,  that  when  the  problem  is  to 
open  and  to  keep  open  the  markets  of  the  world,  it  is  sheer  mad- 
ness to  attempt  to  restrict  the  business  as  that  of  a  local  manu- 
factory may  be  restricted.  All  the  wisdom  learned  from  experi- 
ence and  from  political  economists  for  the  last  half  century  must 
be  thrown  to  the  winds  at  the  mad  bidding  of  socialistic  enemies 
of  capital  before  such  a  result  can  be  accomplished.  You  may 
accomplish  it  but  you  will  accomplish  the  destruction  of  trade 
and  commerce  at  the  same  time. 

If  combinations  for  a  legitimate  purpose  are  necessary  and 
beneficial,  the  question  as  to  how  they  are  formed  is  of  little 
consequence.  The  important  question  is  not  how  are  they  formed, 
but  for  what  purpose  and  for  what  effect?  If  a  corporation  is 
formed  for  refining  in  New  York  City  and  the  parties  in  interest 
desire  to  carry  on  refining  also  in  Philadelphia,  why  may  they 
not  form  a  corporation  in  Pennsylvania?  If,  afterwards,  they 
want  to  establish  branches  for  trading  in  their  products  in  Chicago, 
St.  Louis,  Louisville  and  elsewhere,  why  may  they  not  establish 
trading  corporations  under  the  laws  of  the  several  States?  The 
business  might  all  be  done  by  one  New  York  or  one  Pennsyl- 
vania corporation,  but  it  is  fairer  to  the  several  States  that  cor- 
porations doing  business  in  them  should  as  far  as  possible  be 
organized  under  and  subject  to  their  own  laws.  When  corpora- 
tions are  thus  organized  in  different  States,  the  stocks  held  by 
the  same  stockholders,  and  conducted  in  the  same  interest, 
placing  these  stocks  in  the  hands  of  trustees,  and  receiving 
therefor  a  trustee's  certificate  representing  the  combined  interest, 
is  a  matter  of  simple  convenience.  It  neither  adds  to  nor  takes 
away  from  the  fact  of  combination  caused  by  common  ownership 
of  the  stock  and  the  common  interest,  nor  can  it  harm  the  public 
in  any  way  unless  the  purpose  and  effect  of  the  combination  is 
harmful  to  the  public.  It  was  in  this  way  that  the  Standard  Oil 
Trust  was  created.  It  was  the  parent  of  the  Trust  system. 
Whether  any  trust  existed  before  it  or  any  trust  since  created  is 
at  all  similar  to  it,  I  do  not  know.     Every  combination,  by  what- 


20 

ever  name  called,  must  be  judged  by  its  own  history,   and  stand 
or  fall  on  its  own  merits  or  demerits. 

It  is  asserted  with  remarkable  iteration,  that  "  Trusts  "  are  in 
some  mysterious  manner  exempt  from  legal  jurisdiction.  I  can- 
not understand  upon  what  conception  such  statements  are  based. 
No  subject  of  which  the  law  takes  cognizance  is  more  particularly 
subject  to  judicial  supervision  and  control  than  trusts.  Courts 
may  declare  them  void  or  enforce  them,  may  appoint  and  remove 
trustees,  may  require  an  accounting  at  any  time.  Trustees  are 
personally  responsible  for  the  slightest  deviation  from  the  trusts 
imposed  in  them.  Trusts  may  be  springing  up  like  mushrooms 
in  the  night,  but  if  tbey  are  for  any  illegitimate  purpose  they 
will  decay  as  rapidly.  Thev  are  illy  calculated  for  any  hazard- 
ous, speculative  or  doubtful  business.  Responsible  trustees  could 
not  be  found  to  incur  the  personal  risks.  They  are  well  calcu- 
lated for  a  safe  and  legitimate  business  of  great  magnitude  carried 
on  through  the  agencies  of  corporations  organized  in  separate 
States.  If  oiganized  for  any  other  purpose  they  will  soon  come 
to  nought, 

The  sum  of  all  that  I  have  said  is  briefly  this  :  The  use  and 
legitimate  effect  of  industrial  combinations  is  to  furnish  the  public 
a  larger  supply  of  commodities  at  a  smaller  price.  The  illegal  pur- 
pose and  effect  of  such  combinations  is  to  famish  the  public  a 
smaller  supply  with  intent  to  unduly  increase  the  price. 

Wise   legislation   will   prevent  the  abuse  without  interfering 
v"with  the  useful  results. 

Jl  now  propose  to  review  the  history  of  the  Standard  combina- 
tion, both  prior  and  subsequent  to  the  formation  of  the  Trust,  and 
I  expect  to  demonstrate  that  the  necessities  of  the  business  de- 
manded association  on  a  large  scale;  that  the  business  has  always 
been  competitive  both  at  home  and  abroad;  that  the  combination 
has  constantly  cheapened  manufacture  and  improved  the  manu- 
factured products ;  that  it  has  increased  the  demand,  and  dimin- 
ished prices  to  an  extent  unparalleled  in  any  other  business ;  that, 
in  short,  it  has  furnished  oil  at  the  lowest  possible  prices  at  home, 
and  built  up  an  American  ti  ade  of  fifty  millions  a  year  abroad, 
which  it  maintains  against  the  fiercest  competition. 


21 


II. 


HISTORY  OF  THE  STANDARD  OIL  COMBINATION. 

Petroleum  was  discovered  in  1859.  At  first  it  was  simply 
distilled,  and  a  product  obtained  unsatisfactory  and  dangerous. 
Improvements  were  made,  new  products  discovered,  hundreds  of 
patents  taken  out  and  hundreds  of  refineries  erected  in  the  oil 
region.  They  were  universally  small  and  cheap.  In  the  princi- 
pal cities  more  extensive  refineries  with  more  expensive  and 
perfect  machinery  were  established.  All  the  refineries  were 
competitive,  and  although  for  a  time  the  business  was  prosperous, 
for  many  years  the  history  of  the  refining  business  was  mainly 
one  of  disaster,  failure  and  bankruptcy.  Up  to  1872  oil  had  not 
been  sold  as  low  as  twenty-five  cents  per  gallon ;  it  was  sold  at 
times  as  high  as  fifty  cents  per  gallon,  and  yet  refiners  on  the 
whole  made  little  money. 

Now  a  reasonable  profit  is  made  at  seven  cents  per  gallon  and 
a  far  better  product  manufactured.  This  result  has  been  largely 
accomplished  by  the  Standard  Oil  Combination. 

In  1870  the  Standard  Oil  Company  of  Ohio  was  organized 
with  a  capital  of  $1,000,000.  There  was  then,  and  is  now,  no 
special  significance  in  this  particular  company.  A  Standard  Oil 
Company  had  been  organized  at  Pittsburgh  prior  to  this  time  by 
other  persons  and  was  doing  a  large  business.  The  business  had 
already  sought  the  centres  of  trade.  The  Cleveland  Standard 
Refinery,  the  Pittsburgh  Refinery,  the  Atlantic  Refining  Com- 
pany cf  Philadelphia,  Chas.  Pratt  &  Co.,  at  New  York,  were 
important  companies  and  refiners.  Because  of  the  disastrous 
history  and  condition  of  the  business  and  its  hazardous  nature 
they  entered  into  an  alliance.  It  was  no  new  thing.  Refiners' 
combinations  of  greater  or  less  magnitude  had  been  entered  into 
at  various  times  during  the  prior  history  of  the  business.     None 


22 

of  them  had  proved  very  lasting.  The  cost  of  transportation 
and  packages  had  been  important  factors  in  ruining  the 
business.  At  first  oil  was  barreled  at  the  wells  and  hauled  in 
wagons  to  the  railroad.  Afterwards  the  system  of  transporting 
to  the  railroad  by  pipes  laid  under  ground  was  adopted.  But 
even  then  up  to  1872  it  cost  fifty  cents  to  transport  a  barrel  of 
oil  by  pipe  line  ten  miles.  Railroad  rates  were  excessive  and 
lacked  uniformity.  Eefiners  who  could  combine  and  throw  a 
large  volume  of  business  to  any  particular  road  could  get  favor- 
able railroad  rates.  Those  who  could  not  do  this  got  such  rates 
as  they  could.  The  rebate  and  drawback  system  was  then  uni- 
versal.    It  was  not  confined  to  oil. 

This  fact,  possibly,  had  much  to  do  with  the  combination  of 
refiners  afterwards  known  as  the  Standard.  But  it  was  by  no 
means  all.  They  as  business  men  saw  this  new,  and  up  to  this 
time  diastrous  business  required  co-operation  for  a  number  of 
reasons. 

It  is  not  probable  that  they  foresaw  all  the  results  of  their 
combination.  We  have  the  right,  however,  to  judge  of  their 
purposes  from  the  ends  they  have  accomplished.  Judged  in  this 
way  we  are  safe  in  saying  that  their  purposes  were  : 

1.  To  cheapen  transportation  both  local  and  to  the  seaboard 
by  perfecting  and  extending  the  pipe-line  system;  by  construct- 
ing and  supplying  cars  by  which  oil  might  be  shipped  in  bulk  at 
less  cost  than  in  packages,  and  the  cost  of  packages  be  also 
saved  ;  by  building  tanks  in  which  oil  in  bulk  could  be  stored  ; 
by  purchasing  and  perfecting  terminal  facilities  for  receiving, 
handling  and  re-shipping  oils ;  by  purchasing  or  building  steam- 
tugs  and  lighters  for  harbor  and  river  service ;  by  building 
wharves,  docks  and  warehouses  for  foreign  shipments. 

2.  To  manufacture  a  better  quality  of  illuminating  oil  at  less 
expense  by  uniting  the  knowledge,  experience  and  skill  of  all 
parties,  as  well  as  their  various  secret  processes  and  patents,  and 
by  building  up  manufactories  on  a  more  extensive  and  perfect 
scale  with  improved  machinery  and  appliances. 

3.  To  unite  with  the  business  of  refining  the  business  necessa- 
rily collateral  thereto,  to  wit,  the  manufacture  of  barrels,  of  tin 


23 

cans,  of  boxes  for  enclosing  cans,  of  paint,  of  glue  and  of  sul- 
phuric acid,  and  to  cheapen  these  necessary  materials  by  manu- 
facturing them  on  a  large  scale  with  the  best  machinery. 

4.  To  obtain  and  utilize  the  best  scientific  skill  in  investigating 
and  experimenting  upon  the  obtaining  of  new  and  useful  pro- 
ducts from  petroleum,  and  to  cheapen  illuminating  oils  by  obtain- 
ing profits  from  these  by-products. 

5.  To  employ  agents  and  send  them  through  the  world  to  open 
up  markets,  learn  the  cheapest  and  best  methods  of  supplying 
them,  and  to  convince  the  people  of  all  lands  of  the  cheapness  and 
safety  of  petroleum  oils. 

6.  By  all  the  means  enumerated  to  increase  the  supply  of  oil 
products  and  lessen  their  price  to  the  consumer. 

I  say  that  these  were  the  objects  of  the  combination,  because 
this  is  what  for  fifteen  years  the  combination  has  been  doing.  To 
accomplish  these  purposes  combination  wTas  absolutely  necessary. 
No  one  man,  no  one  corporation,  could  accomplish  it.  It  meant 
millions  of  money.  How  much  money  it  required  the  parties 
then  inadequaiely  comprehended.  The  result  proved  that  for  the 
pipe  line  and  storage  system  alone  thirty  millions  of  dollars  were 
necessary. 

Such  were  the  purposes  of  the  combination.  What  was  its 
nature? 

Stockholders  of  the  various  corporations  referred  to  became 
mutually  interested  in  the  stocks  of  all.  It  was  a  union  not  of 
corporations,  but  of  stockholders.  The  companies  continued  to 
conduct  their  business  as  before.  They  ceased  to  be  competitive 
in  the  sense  of  striving  to  undersell  each  other.  They  continued 
to  be  competitive,  and  are  to  this  day  competitive,  in  the  sense 
that  each  company  strives  to  show  at  the  end  of  the  year  the 
best  results  in  making  the  best  products  at  the  lowest  cost. 

From  time  to  time  new  persons  and  capital  were  taken  into 
this  association.  Whenever  and  wherever  a  man  showed  himself 
skillful  and  useful  in  any  branch  of  the  business  he  was  sought 
after.  As  the  business  increased  new  corporations  were  formed 
in  various  States,  some  as  trading  companies,  others  as  manufac- 


24 

turing  companies.  In  some  cases  the  stocks  of  tbese  companies 
were  placed  in  the  hands  of  trustees  instead  of  being  distributed 
to  the  owners.  Out  of  this  grew  what  is  known  as  the  Standard 
Oil  Trust.  It  was  simply  an  agreement  placing  all  these  stocks 
in  the  hands  of  trustees,  declaring  the  trust  on  which  they  were 
held,  and  providing  for  the  issuing  of  a  certificate  showing  the 
amount  of  interest  of  each  owner  in  the  stocks  so  held  in  trust. 
This  agreement  did  not  in  any  essential  manner  change  the  nature 
of  the  association  previously  existing.  Its  essential  character 
was  and  is  simply  a  common  ownership  of  stocks  in  various  cor- 
porations. If  it  is  a  crime  ptr  se,  this  and  only  this  constitutes 
the  crime,  namely — that  persons  unite  their  capital  and  purchase 
stocks  of  various  corporations,  or  form  various  corporations,  and 
hold  their  stocks  for  the  purpose  of  conducting  an  extensive  busi- 
ness by  means  of  different  corporations.  The  State  of  New  York 
permits  manufacturing  corporations  to  be  formed  with  unlimited 
capital.  It  permits  corporations  so  formed  to  combine.  A  cor- 
poration formed  there  could  carry  on  business  throughout  the 
nation,  or  a  commercial  business  throughout  the  world.  This 
would  be  commendable.  But  suppose  persons  thus  desiring  to 
do  business  prefer,  instead  of  organizing  one  corporation  in  New 
York,  to  organize  a  corporation  in  each  State  in  which  they  do  a 
local  business,  so  that  the  business  transacted  in  each  State  shall 
be  conducted  by  a  home  corporation  subject  in  all  respects  to 
the  law  of  the  State  where  located.  Such  a  plan  has  seemed  to 
me  commendable,  not  blameable,  and,  in  consequence,  we  have 
organized  a  Standard  Oil  Company  in  New  York,  in  New  Jersey, 
in  Kentucky,  in  Iowa,  in  Minnesota;  one  exists  in  Ohio,  one  in 
Pennsylvania.  The  business  of  each  State  is,  as  far  as  possible, 
transacted  by  a  corporation  organized  under  the  laws  of  that 
State  and  subject  to  its  jurisdiction.  It  pays  its  taxes  there, 
and  is  usually  officered  by  citizens  and  residents.  If  this  Gov- 
ernment was  a  unit  instead  of  a  federation  of  States  there 
would  probably  be  no  Standard  Oil  Trust. 

The  voting  power  was  not  changed  by  the  Trust  Agreement. 
Those  named  as  Trustees  then  held  the  voting  power  by  virtue 
of  their  absolute  ownership  of  a  majority  of  the  stock  placed  in 
trust,  and  if   the  trust  was  to-day  dissolved,  the  power  of  the 


25 

Trustees  would  not  be  altered.  They  as  individuals,  would  still 
be  the  holders  of  a  majority  of  all  trie  stocks  held  in  trust,  and 
would  as  individuals  possess  the  voting  power  they  now  exercise 
as  trustees. 

I  have  stated  the  purposes  of  this  combination.  Let  us  take 
up  the  facts  and  figures  showing  what  has  actually  been  accom- 
plished. 

1.  The  Standard  Oil  Combination  has  not  withheld 
supplies  and  increased  prices,  but  the  contrary. 

The  oil  business  began  in  1859.  This  co-operation  of  refiners 
began  in  1872,  but  reached  no  considerable  proportions  until  187-1. 

In  1870  the  production  of  oil  was  about  five  million  barrels, 
and  consumption  about  equal.  Price  of  crude  oil  at  well,  $3.86 
per  bbl.  Price  of  export  oil  in  New  York,  barrel  included,  $11 
per  bbl. 

In  1873,  the  first  year  after  co-operation  began,  the  production 
of  oil  reached  nearly  ten  million  barrels,  the  consumption  was 
nine  and  one-half  millions,  the  price  of  crude  oil  fell  to  an  average 
of  $1.73  per  bbl.,  and  the  price  of  export  oil  to  $7.50  per  bbl. 
The  value  of  exports,  notwithstanding  decrease  in  price,  increased 
from  32^  millions  to  42  millions  of  dollars. 

In  1876  there  was  a  rise  in  the  price  of  crude  oil  to  an  average  of 
$2.50  per  bbl.,  based  upon  the  fact  that  production  was  not  materi- 
ally increasing,  and  the  oil  regions,  then  confined  to  Venango, 
Clarion  and  Butler  Counties,  Pennsylvania,  were  supposed  to  be 
fully  developed  and  liable  to  exhaustion.  Refined  oil  advanced 
in  consequence  to  an  average  of  $8.00  per  bbl.  for  that  year. 
From  that  date  the  increase  in  supply  and  decrease  in  price 
has  been  constant.  At  the  close  of  1881,  the  date  of  forma- 
tion of  the  Trust,  the  consumption  of  oil  had  increased  to  over 
nineteen  million  barrels  per  year;  the  price  of  export  oil  at  New 
York  had  decreased  to  about  $3.86  per  bbl.,  which,  estimating 
package  at  $1.50  per  bbl,  leaves  $1.86  as  the  price  of  the  oil  per 
barrel,  and  yet  the  value  of  the  exports  amounted  to  over  forty 
million  dollars,  showing  an  enormous  increase  in  the  trade. 

Notwithstanding  the  wonderful  decrease  in  price  and  increase 
in  amounts  supplied  to  the  market   up  to  this  time,  let  us  see 


26 

whac  followed  the  creation  of  the  Trust.  The  decrease  in  price 
and  increase  in  supplies  did  not  cease.  -At  the  close  of  1887,  six 
years  after  the  creation  of  the  Trust,  we  find  the  supply  to  the 
markets  increased  to  over  26£  millions  of  barrels,  of  42  gallons 
each,  per  year :  the  price  of  the  crude  material  reduced  to  an 
average  of  66.6G  cents  per  barrel,  and  the  price  of  110°  Standard 
"White  to  $2.81  per  bbl.,  of  50  gallons,  including  the  barrel.  And 
notwithstanding  the  almost  nominal  price  of  oil,  the  value  of  ex- 
ported products  reached  for  that  year  the  enormous  sum  of 
$46, 824,933. 

These  figures  speak  for  the  Standard  Oil  Company  as  nothing 
else  can  do. 

It  is  said  the  decrease  in  the  price  of  refined  products  is  entirely 
in  consequence  of  the  decline  in  the  price  of  crude  oil.  If  so,  the 
Standard  can  claim  no  credit  for  it,  because  the  result  of  all  its 
operations  is  to  keep  up  the  price  of  the  crude  product.  But 
look  at  the  figures.  In  1872  crude  oil  was  9.43  cents  per 
gallon  and  refined  23.59  cents  per  gallon.  In  1887  crude  oil  was 
1.59  cents  per  gallon  or  7.84  cents  less  than  in  1872.  Had  the 
refined  product  been  reduced  only  to  the  same  extent  it  would 
have  been  15.75  cents  per  gallon  in  1887.  But  it  was  only  6.72 
cents  per  gallon.  The  difference,  9.03  cents  per  gallon,  represents 
the  reduction  in  the  refined  products  after  eliminating  the  effect 
of  the  decline  in  crude.  The  prices  of  all  other  products  of  petro- 
leum were  reduced  in  the  same  proportion  and  as  over  a  thousand 
million  gallons  of  crude  were  consumed  in  1887,  this  reduction  in  the 
cost  of  refined  products,  after  allowance  for  the  reduction  in  crude,  bene- 
fitted the  public  to the  extent  of about  ONE  HUNDRED  MILLIONS 
OF  DOLLARS  for  that  single  year.  For  this  the  Standard  claims 
its  due  proportion  of  credit. 

2.  Cheapening  Transportation. — In  1872  the  pipe  line  sys- 
tem was  in  its  infancy.  A  number  of  local  lines  existed.  Their 
service  was  inefficient  and  expensive.  There  was  no  uniform  rate. 
The  united  refiners  undertook  to  unite  and  systematize  this  busi- 
ness. They  purchased  and  consolidated  the  various  little  com- 
panies into  what  was  long  known  as  the  United  Pipe  Line  System. 
The  first  effect  of  this  combination  was  a  reduction  of  price  of 
all  local  transportation  to  an  uniform  rate  of  at  first  30  and  soon 


27 

after  20  cents  per  barrel.  The  pipes  were  placed  at  every  well. 
A  storage  system  was  also  adopted.  Huge  iron  tanks  were 
builded  in  which  oil  could  be  stored  awaiting  a  market.  The 
cost  of  storage  has  been  reduced  until  it  is  now  cheaper  than  that 
of  any  other  commodity.  Oil  was  taken  from  any  well,  stored  in 
these  tanks,  and  a  certificate  given  the  producer  showing  the 
amount.  These  certificates  ultimately  became  the  medium  of 
trade  in  oil.  They  were  bought  and  sold,  and  when  presented  at 
any  pipe  line  terminus  at  any  railroad  the  oil  was  delivered  on 
board  cars.  The  amount  of  capital  back  of  these  certificates,  and 
the  uniformly  careful  manner  in  which  the  business  was  con- 
ducted, eventually  created  such  public  confidence  in  them  that 
they  have  been  dealt  in  by  thousands  of  persons  in  this  and  other 
countries  who  never  saw  a  barrel  of  crude  oil.  Exchanges  for 
their  sale  exist  in  several  of  the  principal  cities.  They  are  taken 
by  banks  as  collateral.  They  are  as  good  as  money.  They  are 
now  dealt  in  in  the  New  York  Stock  Exchange.  Oil  is  deliv- 
ered on  them  in  New  York  as  well  as  in  the  oil  region. 

Although  the  business  was  built  up  and  owned  by  those  who 
built  up  and  owned  the  Standard  Oil  Company,  the  business  is 
done  for  the  public.  Its  benefit  to  the  oil  trade  has  been  incal- 
culable. Instead  of,  as  is  sometimes  charged,  the  Standard  being 
the  sole  buyer,  the  buyers  are  numbered  by  thousands.  The 
producer  not  only  gets  the  highest  possible  price  which  competi- 
tion to  purchase  will  bring,  he  gets  also  cash  in  hand.  He  never 
sees  his  oil  from  the  moment  it  leaves  his  well.  When  he  wants 
his  well  tank  relieved,  he  telephones  a  pipe  line  gauger,  sees  his 
oil  pumped,  receives  a  ticket  showing  the  amount,  takes  it  to  a 
pipe  line  office  and  gets  a  certificate  which  he  can  hold,  borrow 
on  or  sell  in  any  exchange,  as  he  sees  fit.  No  one  can  estimate 
this  advantage  to  the  business.  Without  combination,  aggregated 
capital  and  public  confidence  in  the  security,  it  could  not  have 
been  accomplished.  Should  you  dissolve  the  combination  and 
disperse  the  capital  which  makes  these  certificates  secure,  the 
system  could  no  longer  be  maintained. 

The  figures  will  show  that  in  one  year  the  production  of  oil 
exceeded  thiry-one  millions  of  barrels,  or  nine  million  barrels  in 
excess  of  consumption.     Consider  for  a  moment  what  this  means. 


28 

Every  day  of  that  year  iron  tankage  had  to  be  built  to  accom- 
modate twenty-five  thousand  barrels  of  surplus  oil.  This  meant 
an  army  of  iron  workers  and  tank  builders,  and  a  cost  per  day  of 

$7,500.' 

This  the  Standard  Oil  Companies  accomplished.  How,  with- 
out aggregated  capital,  could  it  have  been  done  ?  It  is  idle  to 
speak  of  the  work  as  Herculean.  In  these  days,  by  combination 
of  money  and  effort,  the  labor  of  a  thousand  Hercules  is  easily 
accomplished. 

So  much  for  local  transportation  and  storage.  About  1879  or 
'80  it  was  discovered  that  railways  were  inadequate  to  the  task 
of  getting  oil  to  the  seaboard  as  rapidly  as  needed.  Combined 
capital  and  energy  were  equal  to  the  emergency.  No  need  to 
detail  how  it  was  done.  To-day  there  reaches  from  che  oil  re- 
gions of  Pennsylvania  and  New  York  to  the  principal  cities  iron 
pipes  conducting  oil  as  it  comes  from  the  wells.  Two  such  lines 
reach  to  New  York  harbor  with  a  capacity  of  25,000  barrels  per 
day.  There  is  one  such  line  to  each  of  the  cities  of  Philadel- 
phia, Baltimore,  Buffalo,  Cleveland  and  Pittsburgh,  built  by  the 
Standard  Oil  combination  at  a  cost  of  millions  and  doing  busi- 
ness for  the  public. 

Now  a  word  as  to  railway  transportation.  The  one  burden  of 
the  charges  against  the  Standard  is  that  it  received  special  rates 
from  railroads  which  enabled  it  to  distance  its  competitors.  There 
is  more  grounds  for  this  than  any  other  charge  made  against  it. 
As  before  remarked,  probably  the  necessity  of  in  some  way 
improving  and  cheapening  transportation  was  a  strong 
inducement  to  the  original  combination.  There  were  competing 
roads  and  it  was  found  that  those  who  could  ship  in  large  and 
uniform  quantities  over  any  particular  road  could  command 
special  rates.  It  was  then  the  universal  mode  of  business.  The 
man  who  could  not  avail  himself  of  it  might  as  well  retire  from 
business.  The  Standard  availed  itself  of  this  mode  of  business. 
It  could  furnish  the  railroads  with,  not  car  loads  but  train  loads. 
Besides  it  built  loading  stations  and  loaded  the  trains  by  its  own 
labor.  It  built  terminal  stations  where  it  received  and  unloaded 
trains  itself.  It  became  its  own  insurer  and  released  the  rail- 
roads  from   any  obligations   for   damages.     It   found   that   the 


29 

country  had  not  white-oak  forests  sufficient  to  furnish  material 
for  making  barrels  to  hold  all  the  oil  shipped  and  it  experimented 
on  car  after  car  for  carrying  oil  in  bulk.  When  the  proper  car 
was  found  it  constructed  thousands  of  them  and  placed  them  on 
the  railroads.  For  these  services  it  demanded  and  obtained  low 
and  lower  rates  of  freight.  The  freight  was  lowered  to  the  public 
at  the  same  time.  In  1872,  it  cost  $1.50  to  get  a  barrel  of  oil  to 
New  York.     To-day  it  costs  fifty  cents. 

It  is  true  the  Standard  often  got  a  special  rate.  The  railroads 
refused  to  carry  oil  for  the  same  prices  for  those  who  shipped  in 
packages  in  car-load  or  less  than  car-load  lots,  who  did  not  do 
their  own  loading  or  unloading,  or  furnish  their  own  cars  or 
terminal  facilities.  Whether  this  was  an  absurd,  unjust  and 
criminal  position  for  the  railroads  to  take,  let  the  Supreme  Court 
of  the  United  States  decide.  The  question  in  various  phases  is 
before  it.  The  Standard  has  always  contended  that  its  immense 
outlay  in  cheapening  the  actual  cost  to  the  railroads  of  oil  trans- 
portation entitled  it  to  correspondingly  less  rates  of  freight. 

The  Inter-State  Commerce  Commission  has  lately  decided  that 
every  pound  of  oil  is  entitled,  whether  carried  in  barrels  or  in 
bulk,  to  reach  the  market  at  equal  rates.  This  is  founded  on  the 
modern  idea  that  enterprise,  energy  and  capital  are  not  entitled 
to  advantage  in  competition.  The  race  is  not  to  the  swift,  nor 
the  battle  to  the  strong.  Controlled  by  such  ideas,  competition 
is  of  no  benefit  to  the  public.  All  are  placed  upon  a  dead  level. 
The  unfittest  as  well  as  the  fittest  survive.  Whether  this  is  or  is 
not  the  correct  principle  the  result  is  that  to-day  all  shippers,  by 
all  modes,  are  charged  the  same  freight  per  pound. 

One  word  more  before  leaving  this  subject.  Assertions  of  the 
most  absurd  character  have  been  made,  published  in  magazines 
and  books,  and  reiterated  on  the  floor  of  Congress  by  those  who 
ought  to  know  whether  they  speak  the  truth  or  not,  in  relation  to 
the  amount  of  these  special  rates  or  drawbacks.  The  favorite 
story  is  that  A.  J.  Cassatt  testified  before  a  New  York  Legislative 
Investigating  Committee  that  the  railways  had  paid  the  Standard 
$10,000,000  in  rebates  in  eighteen  months. 

Of  course,  A.  J.  Cassatt  never  testified  to  any  such  thing  at 
any  time  or  place,  and  the  man  who  invented  the  story  certainly 


30 

smiled  at  its  absurdity.  It  has  become  a  part  of  history,  however, 
and  may  be  found  in  learned  volumes  and  in  the  Congressional 
Record.  It  will  be  told  for  truth  after  we  are  dead.  It  is  a  fair 
sample  of  stories  about  the  Standard. 

3.  Cheapening  Cost  of  Manufacture. — The  Association  of 
Refiners  united  the  best  knowledge  and  skill  in  the  business.  If 
one  had  a  patent  it  was  open  to  all.  If  one  had  a  secret  the 
others  shared  it.  Methods  were  compared.  New  plans  were 
tested.  Results  were  and  are  carefully  collated.  If  one  estab- 
lishment succeeds  in  saving  the  fraction  of  a  cent  per  barrel  in 
making  oil  the  reason  is  known  and  the  method  of  saving 
adopted.  If  good  results  are  obtained  in  one  manufactory  and 
bad  results  in  another,  the  reason  is  at  once  discovered  and 
faults  corrected.  Scientific  men  are  constantly  employed  who 
have  made  useful  discoveries  in  new  products  and  new  methods 
of  manufacture.  The  eonsequence  of  all  this  is  that  since  1872 
the  actual  cost  of  manufacture  of  refined  oil  has  been  reduced 
6b'  per  cent. 

The  public  have  the  advantage  of  this  in  the  reduced  price  at 
which  the  oil  is  sold,  which  benefit  amounts  to  millions  annually. 

4.  The  Same  Cheapening  of  Manufacture  has  taken  place 
in  the  manufacture  of  barrels,  tin  cans,  boxes  for  enclosing  cans, 
paint,  glue  and  acid. 

In  1872  barrels  cost  the  trade  $2.35  each.  They  are  now 
manufactured  at  our  own  manufactories  at  a  cost  of  $1.25  each. 
About  3,500,000  barrels  are  used  per  annum.  This  single  item 
amounts  to  $1,000,000  per  year. 

In  1874  cans  cost  thirty  cents  each.  They  are  now  made  by 
our  manufactories  for  less  than  fifteen  cents. 

Thirty-six  million  cans  are  used  each  year,  and  this  one  item 
of  saving  amounts  to  $5,400,000  each  year. 

In  1874  wooden  cases  cost  twenty  cents  each.  They  are  now 
manufactured  by  our  own  manufactories  at  a  cost  of  about 
thirteen  cents  each.  The  saving  in  this  item  alone  amounts  to 
$1,260,000  each  year. 

The  same  cheapening  process  has  taken  place  in  the  manufac- 
ture of  tanks,  stills,  pumps,  and  everything  used  in  the  business. 


31 

All  these  millions  are  saved  by  the  economies  which  combina- 
tion of  persons,  capital,  experience  and  skill  render  possible, 
without  reducing  the  wages  of  a  single  laboring  man. 

5.  The  Business  in  By-Products  of  Petroleum. — After 
illuminating  oil  is  manufactured  a  large  residuum  is  left.  Up  to 
1875  this  was  almost  exclusively  used  as  fuel  at  the  refineries. 
The  Standard  devoted  special  attention  to  this  residuum.  Ex- 
perts visited  the  great  shale  works  in  Scotland  and  studied  their 
methods.  The  consequence  was  that  extensive  works  were  erected 
for  the  manufacture  of  products  from  this  residuum,  principally 
lubricating  oils  and  parafnne  wax.  These  works  are  necessarily 
expensive,  and  manufacture  the  residuum  of  a  large  number  of 
refineries.  Small  refineries  cannot  advantageously  engage  in  this 
branch  of  business  and  cannot  afford  to  manufacture  illuminating 
oils  unless  they  can  dispose  of  their  residuum.  This  is  one  of 
the  reasons  so  many  small  refineries  prove  failures.  The  cost  of 
manufacture  of  lubricating  oils  and  wax  has  been  reduced  by 
improved  methods  and  constant  attention,  and  the  price  to  the 
consumer  has  been  constantly  reduced,  averaging  to-day  fifty  per 
cent,  less  than  in  1878. 

The  use  of  illuminating  oils  was  introduced  to  the  public  with  , 
comparative  ease,  because  it  met  an  urgent  need.  Lubricating 
oils,  on  the  contrary,  met  with  slow  recognition,  having  to  sup- 
plant sperm,  lard  and  fish  oils.  In  Europe,  in  addition,  the 
products  of  shale  had  to  be  competed  with.  The  work  was 
pushed  with  vigor,  with  capital  and  with  success.  An  enormous 
home  and  foreign  trade  has  been  established  in  these  by-products. 

Numerous  other  useful  products  are  obtained  from  petroleum, 
and  no  expense  has  been  spared  to  find  a  use  and  a  market  for 
them.  All  this  results  in  ability  to  sell  illuminating  oil  at  a  price 
a  little  above  the  cost  of  the  crude  product,  and  thus  to  make  it 
"  the  poor  man's  light." 

6.  Markets  for  Products. — To  make  the  consumption  as 
great  as  it  is,  the  first  essentials  were  good  quality  and  cheapness. 
But  that  is  not  enough.  Twenty-five  years  ago  the  world  was 
just  beginning  to  bear  of  Petroleum.  When  this  Standard  Com- 
bination was  formed  twelve  years  had  elapsed  and  the  world  was 
using  less  than  six  millions  of  barrels  per  annum.     Of  that  three 


32 

and  one-half  million  barrels  were  exported.  In  two  years  after- 
wards the  exports  were  nearly  six  million  barrels.  The  reason 
for  it  was  that  no  single  refinery  could  afford  to  keep  agents  in 
Europe  and  Asia  to  demonstrate  the  advantages  of  this  product, 
open  means  for  its  convenient  and  safe  transhipment  and  force  it 
upon  the  trade.  The  refiners  when  combined  could  do  it,  did 
do  it  and  continue  to  do  it.  The  consequence  is  that  petroleum 
is  to-day  the  light  of  the  world.  It  is  carried  wherever  a  wheel 
can  roll  or  a  camel's  hoof  be  planted.  The  caravans  on  the 
desert  of  Sahara  go  laden  with  Pratt's  Astral,  and  elephants  in 
India  carry  cases  of  Standard  White.  Ships  are  constantly  load- 
ing at  our  wharves  for  Japan,  Java  and  the  most  distant  isles  of 
the  sea.  Our  country's  revenues  are  swollen  fifty  millions  of 
dollars  per  year  by  this  trade.  Think  you  it  was  built  up  or 
maintained  without  cause  ?  It  never  could  have  happened  with- 
out combinations  of  persons  and  capital,  and  without  the  support 
of  combination  and  capital  the  whole  trade  would  be  swept  to 
destruction  as  the  vanishing  of  a  cloud  on  a  summer's  day.  To 
illustrate,  let  me  give  the  history  of  a  small  subject. 

Complaints  occasionally  come  to  us  from  all  parts  of  the  world 
that  oil  is  not  proving  satisfactory.  An  agent  is  sent  to  investi- 
gate. Sometimes  the  cause  of  the  trouble  is  found  to  be  Russian 
oil  in  American  packages,  or  oil  under  false  trade-marks.  Con- 
suls, Ministers  and  Governments  are  besieged  until  a  remedy  is 
obtained.  One  great  cause  of  complaint  arose  from  bad  wicks. 
Some  years  ago  a  manufactory  was  established  by  the  Standard 
interests  for  manufacturing  the  best  wick  known.  Its  capital  is 
large,  but  it  sinks  about  all  its  capital  every  year.  The  wicks 
are  sold  at  a  price  so  low  as  to  compel  their  use.  Things  like 
these  cost  thousands  of  dollars  per  annum,  but  they  save  our 
market.  This  is  done  at  our  expense,  but  our  competitors  reap 
their  share  of  the  benefit.  Without  combination  it  would  not  be 
done  at  all. 

On  the  shores  of  the  Caspian  Sea  for  centuries  have  burned  the 
sacred  fires  of  Baku.  These  fires  are  fed  by  petroleum  which 
there  is  ready  to  burst  forth  like  a  volcano  at  the  piercing  of  a 
few  feet  of  rock.  Long  before  petroleum  was  discovered  in 
Pennsylvania  it  was  an  article  of  commerce  in  Russia.     No  great 


33 

activity  was  shown  in  this  field  until  about  the  year  1872  when 
the  oil  lands  passed  into  private  hands.  In  1879,  195  refineries 
were  in  existence,  capable  of  turning  out  1,400,000  barrels 
annually. 

About  this  time  they  discovered  there  what  had  been  demon- 
strated here  long  before,  that  combination  and  capital  were 
necessary  to  make  a  success  of  the  business.  Nobel  Brothers  put 
into  it  a  capital  of  $2,500,000.  All  the  American  experience 
was  utilized.  Pipe  lines  were  built,  2,500  tank-cars  placed  upon 
the  railroad,  huge  tanks,  warehouses  and  docks  erected,  ships  con- 
structed carrying  oil  in  bulk,  and  case  and  can  manufactories  were 
established.  In  fact,  an  imitation  of  the  Standard  Oil  enterprise 
manifested  itself  on  the  shores  of  the  Caspian.  No  doubt  the 
hundreds  of  small  refineries,  which  for  years  had  accomplished 
as  little  as  the  wind-mill  at  Nantucket,  were  crushed  out.  but  a 
business  was  built  up  and  Eussian  oil  was  placed  upon  the 
market,  not  only  in  Eussia  and  the  Orient,  but  also  in  Austria, 
Germany  and  even  England.  Since  that  day  Eussian  competi- 
tion has  to  be  fought  in  every  portion  of  the  Eastern  Hemisphere. 
Eussian  oil  is  sold  in  American  packages  under  American  trade- 
marks. The  crude  product  is  cheaper  than  water,  varying  from 
two  to  six  cents  per  barrel.  A  better  illuminating  product  is 
constantly  being  obtained.  It  is  rich  in  lubricating  oils  of  a  good 
quality.  Its  refuse  is  used  for  fuel  on  the  ships  which  transport 
it.  The  Eothschilds  have  taken  hold  of  the  business  and  new 
pipe  lines  are  projected.  Unlimited  capital  and  energy  will  be 
put  into  the  business.  It  must  be  met  with  unlimited  capital  and 
energy  or  our  foreign  trade  of  fifty  millions  annually  will  be 
sadly  impaired. 

Had  this  matter  been  left  to  individuals  to  be  met  without 
combination  or  united  effort,  Eussia  to-day  would  control  all  the 
markets  of  the  East.  Pass  a  law  that  persons  in  the  same  busi- 
ness cannot  agree  upon  prices,  or  co-operate  in  their  business, 
and  in  five  years  instead  of  an  annual  income  of  fifty  millions 
from  oil  exports  you  will  not  have  ten  millions.  Without  the 
pipe  line  system,  the  cheap  transportation,  and  the  improvements 
in  manufacture  which  I  have  narrated,  the  markets  in  Europe 
and  Asia  could  not  be  held  against  Eussia  for  a  single  year. 
3 


34 

Such  is  briefly  the  history  of  the  rise,  progress  and  results  of 
the  business  of  the  United  Refiners,  popularly  known  for  many 
years  as  the  Standard  Oil  Company,  now  known  as  the  Standard 
Oil  Trust.  I  may  state  farther  in  relation  to  the  companies 
represented  in  this  union,  that  they  have  been  guilty  of  no  stock 
jobbing  and  no  watering  of  stock;  that  no  creditor  has  suffered; 
that  their  business  obligations  are  strictly  fulfilled  ;  that  labor  is 
amply  rewarded,  and  that  it  has  an  unparalleled  record  of  satis- 
factory relations  with  its  army  of  25,000  employees. 

What,  then,  are  the  causes  which  has  led  to  the  popular  opinion 
that  this  Standard  is  a  gigantic  monopoly  which  must  be  crushed? 
The  reasons  are  various,  and  I  can  only  briefly  review  the  prin- 
cipal ones. 

ii  The  principal  reason  at  present  is  that  there  is  "in  the  air" 
a  socialistic  prejudice  against  capital.  It  is  useless  to  seek  for  its 
causes,  or  to  attempt  to  analyze  it.  It  is  strong  and  dangerous. 
Legislators  can  do  much  to  counteract  it  by  attempting  to  remedy 
real  evils,  and  much  to  foster  it  by  permitting  demagogic  feeling 
to  usurp  the  place  of  reason. 

2.  The  Standard,  on  account  of  its  aggregation  of  large  capital, 
stands  as  the  type,  in  the  public  estimation,  of  a  modern  mon- 
opoly crushing  out  all  competition. 

It  is  not  and  never  has  been  a  monopoly  in  any  sense  of  the 
word.  The  corporations  are,  with  a  single  exception,  ordinary 
manufacturing  companies,  organized  under  general  laws  of  the 
various  States.  They  do  not  possess  a  single  exclusive  franchise 
or  special  privilege.  All  the  privileges  they  possess  are  open  to 
all  persons  and  may  be  obtained  by  simply  signing  and  filing  a 
paper  stating  the  desire  to  be  incorporated.  The  "Trust"  is  a 
trust  and  nothing  more.  The  companies  are  governed  by  their 
respective  officers  and  are  subject  to  the  laws  of  the  several 
States  where  organized.  The  Trustees  are  the  stockholders. 
The  companies  necessarily  work  in  the  same  interest  because  the 
interest  of  the  stockholders  is  identical. 

Neither  has  the  Standard  destroyed  competition.  In  1872,  the 
date  of  the  inception  of  this  union  of  refiners,  the  total  amount 
of  crude  oil  refined  was  about  5£  millions  of  barrels  annually. 
Of  this  business  the  refiners  who  ultimately  became  associated 


35 

did  by  far  the  greater  proportion.  Competition  at  home  and 
abroad  has  never  ceased  for  a  single  instant  and  has  always  been 
strong  enough  to  give  the  public  all  the  advantages  which  com- 
petition confers.  To-day  the  amount  of  oil  refined  is  about 
twenty-four  millions  of  barrels  annually,  and  of  this,  refineries 
in  competition  with  the  Standard,  do  about  twenty -five  per  cent.,  or 
six  millions  of  barrels,  which  is  more  than  the  total  amount  re- 
fined when  this  combination  began,  and  probably  three  times 
more  than  the  competitive  refiners  manufactured  at  that  date. 
How  can  that  business  be  said  to  be  crushed  out  which  has 
tripled  during  the  crushing  out  process  ?  There  are  to-day  over 
one  hundred  refineries  in  active  competition.  If  any  undue 
price  was  placed  upon  oil  products  the  number  would  double 
almost  in  a  night.  Nothing  but  low  prices  keeps  out  competitive 
capital. 

All  competitive  refineries  have  benefitted  by  the  Standard's 
efforts  at  improvement  and  by  its  money  expended  in  establish- 
ing markets.  Many  refineries  have  failed.  Competition  has 
simply  moved  to  a  higher  plane.  Those  who  could  not  or 
would  not  follow  the  business  in  its  new  lines  could  not  succeed. 
Thousands  of  those  who  enter  business  are  doomed  to  failure 
no  matter  what  the  circumstances.  No  refiner  has  failed  without 
damning  the  Standard. 

3.  Another  cause  of  the  prevalent  popular  belief  may  be  found 
in  the  absurd  tales  told  in  regard  to  the  Standard's  increase  of 
capital.  As  a  sample  story,  I  extract  this  language  from  a  late 
speech  before  the  Congressional  House  Committee  on  Manu- 
factures :  "  Do  you  know,  my  friends,  the  wealth  of  this  monop- 
oly to-day?  One  hundred  and  fifty  millions,  and  still  a-growing! 
Do  you  know  its  profits  last  year?  Twenty-five  millions  of 
dollars.  I  have  the  figures  here,  and  I  hope  you  will  examine 
them.  Do  you  know  with  what  amount  of  capital  it  started  ? 
Less  than  a  million  dollars.  How  did  it  acquire  the  other 
$149,000,000  ?" 

Talk  like  this  does  very  well  for  oratory,  but  it  puts  truth  to 
the  blush.  In  the  first  place  the  orator  has  watered  the  capital 
of  the  associated  companies  sixty  millions  of  dollars,  which  is 
moderate  for  an  orator  who  has  a  point  to  make,  but  is  contrary 


36 

to  public  policy.  I  only  refer  to  this  matter  to  answer  the  ques- 
tion where  did  the  other  millions  come  from  ?  It  came  from  the 
united  capital  of  the  various  companies  whose  stocks  are  held  in 
trust.  The  Standard  of  Ohio  represents  now  $3,500,000,  its  cap- 
ital having  been  increased  to  that  amount.  In  the  original  union 
all  the  companies  had  large  paid-up  capital.  The  individuals 
thus  uniting  were  able  to  control  large  capital  in  addition.  Other 
large  capitalists  were  induced  to  take  an  interest  in  the  business. 
More  capital  was  obtained  by  credit.  In  this  way  all  the  needed 
capital  has  been  raised  from  time  to  time.  Earnings  have  also 
added  to  the  capital  to  some  extent.  The  dividends  on  Trust 
Certificates  were  f.,r  some  years  six  per  cent.,  and  for  the  last 
eighteen  months  ten  per  cent.  Surplus  earnings  to  the  amount 
of  twenty  per  cent,  have  been  added  to  the  plant.  A  portion  of 
this  may  be  classed  as  an  addition  to  the  capital,  but  not  a  large 
portion,  for  the  plant  depreciates  in  value  very  rapidly.  Thirty 
millions  of  dollars  are,  as  I  said,  invested  in  the  pipe  line  and 
tank  system.  In  this  system  one  million  barrels  of  tankage,  cost- 
ing $300,000,  are  now  being  rendered  useless  every  month.  The 
tanks  are  simply  old  junk.  The  oil  fields  are  not  permanent. 
They  are  rapidly  being  exhausted  and  when  exhausted  an 
investment  of  thirty  millions  of  dollars  will  be  rep-esented  by 
acres  of  old  iron  and  thousands  of  miles  of  iron  rust  under 
ground.  Is  twelve,  or  even  fiftten  per  cent,  on  an  investment 
of  this  character  too  much? 

You  will  ask,  how  about  last  year's  earnings  of  $25,000,000, 
for  which  the  eloquent,  if  not  exact,  orator  holds  the  figures.  He 
only,  of  all  mankind,  holds  the  figures.  The  year's  statements 
are  not  yet  made  up  but  we  know  they  reach  no  such  sum.  The 
earnings  for  1886,  after  making  necessary  deductions  for  depre- 
ciation in  plant,  did  not  exceed  thirteen  per  cent,  on  the  capital. 

Before  leaving  this  subject,  contrast  for  a  moment  the  nature 
of  the  complaints  just  considered.  One  is,  in  effect,  that  the 
Standard  has  sold  its  products  so  low,  kept  the  margin  between 
crude  and  refined  oils  so  close,  that  competitors  could  not  make 
money  and  were  crushed  out.  The  other  is,  that  the  Standard 
sold  oils  too  high  and  made  too  much  money.  Both  views  can- 
not be  true.     The  truth  undoubtedly  lies  between  the  two.     The 


37 

Standard's  methods  of  business  were  such  that  it  could  sell  oil 
products  at  figures  too  low  for  many  competitors  and  still  make 
fair  profits  for  itself.  If  those  methods  of  business  are  justifiable 
which  secure  the  greatest  good  to  the  greatest  number,  this  surely 
cannot  be  condemned. 

3.  The  third  and  last  reason  which  I  shall  consider  for  popular 
prejudice  against  the  Standard,  arises  from  the  complaints  of  oil 
producers  for  many  years,  that  it,  for  its  own  purposes,  kept  down 
the  price  of  crude  oil. 

If  you  have  followed  my  remarks  you  must  be  convinced  that 
the  storage  and  certificate  system  by  which  the  producer  sells  his 
oil  on  Exchanges  to  thousands  of  buyers,  instead  of  to  a  few, 
must  have  tended  to  better  his  prices.  This  system  was  adopted 
and  maintained  at  the  request  of  producers,  and  is  a  sine  qua  non 
of  their  business.  All  the  efforts  I  have  narrated  to  cheapen  the 
cost  of  making  the  products,  and  to  force  them  upon  home  and 
foreign  markets  must  have  also  directly  aided  the  producer.  With- 
out herculean  efforts  to  market  its  products  crude  oil  would  have 
stagnated.  With  forty  millions  of  barrels  of  surplus  stock  in 
tank  how  could  good  prices  be  expected  ? 

But  it  is  said  that  the  Standard  has  speculated  in  these  Certifi- 
cates and  sent  the  market  up  or  down  as  it  wished.  This  is 
emphatically  denied.  It  has  not  speculated.  It  has  purchased 
what  it  needed  and  used  what  it  purchased.  It  has  bought 
largely  at  times  to  save  the  market  from  absolute  ruin,  and  for 
some  years  past,  for  like  reasons,  has  carried  a  large  part  of  the 
stock  of  oil  at  a  loss  to  itself  of  millions. 

To  show  that  the  price  of  crude  oil  has  been  generally  governed 
by  the  law  of  supply  and  demand,  nothing  is  needed  but  the  table 
of  figures  given  in  evidence  before  this  committee. 

Up  to  1866  the  supply  was  limited  and  the  demand  was  fully 
equal  to  it.  No  doubt,  as  indicated  by  the  price  of  $6,  and  $7 
per  barrel,  the  demand  was  in  excess  of  supply.  In  1866  we 
find  an  excess  of  supply  of  half  a  million  barrels  and  a  conse- 
quent drop  in  price  to  $3.76.  The  same  excess  of  production 
continued  in  1867,  and  over  half  a  million  barrels  had  to  be 
stored  in  the  oil  regions.  In  consequence  oil  dropped  to  $2.20. 
Then  for  two  years  the  demand  exceeded  the  supply ;  stocks  on 


38 

hand  were  reduced  and  prices  advanced  to  $3.57  for  1868  and 
$5.61  for  1869.  The  same  causes  kept  prices  near  and  above  $4 
in  1870,  1871  and  1872.  About  this  time  the  great  Butler  field 
was  discovered.  In  1873  we  find  an  accumulation  of  over  a 
million  and  a  half  of  stocks,  and  prices  reduced  to  $1.73.     In 

1874  three  and  one-half  million  stocks  and  prices  1.18.  One 
reason  of  extremely  low  prices  at  this  time  was  the  enormous 
gushers  found  and  ignorance  as  to  the  limits  of  the  field.     In 

1875  and  1876  stocks  were  reduced  to  two  million  barrels  and 
prices  advanced  to  $2.51.  In  1877  the  great  Bradford  region 
became  prominent  and  in  1878  it  was  pouring  out  rivers  of 
oil.  The  production  increased  to  fifteen  million  barrels  per  year. 
"Up  to  this  time  the  refiners  had  fairly  kept  pace  with  the  pro- 
ducers. Markets  had  been  found.  Refined  oil  had  been  reduced 
to  fifteen  cents  per  gallon.  The  consumption  exceeded  thirteen 
millions  of  barrels. 

But  no  exertions,  no  cheapening  of  prices  could  keep  the 
demand  equal  to  the  enormous  supply.  Hence  in  1878  we  find 
over  four  million  barrels  in  stock  and  prices  down  to  $1.16;  in 
1879  eight  millions  in  stock  and  prices  down  to  88£  cents  per 
barrel.  It  is  possible  this  accumulation  is  not  of  itself  sufficient 
to  account  for  the  great  reduction  in  prices.  It  was  this  combined 
with  the  fact  that  a  vast  territory  had  been  found,  apparently 
unlimited  in  its  capacity  of  supply,  and  from  which  oil  was  ob- 
tained at  far  less  expense  than  in  other  territory.  After  that 
date  the  annual  supply  increased  to  31  millions  in  1882,  the 
stocks  on  hand  to  39  millions  in  1884,  and  prices  have  since 
kept  below  the  dollar  line,  except  in  the  single  year  when  buyers 
were  encouraged  by  a  falling  off  in  production  of  about  five  mil- 
lion barrels,  and  prices  averaged  $1.05.  But  no  market  could  be 
sustained  with  this  enormous  load  of  surplus  production  of  over 
thirty  million  barrels,  and  prices  went  down,  until  in  1887  an 
average  of  66.6  J  cents  per  barrel  was  reached.  At  present  stocks 
are  being  rapidly  drawn  upon,  buyers  are  encouraged  and  prices 
stand  at  or  near  95  cents. 

There  is  no  escaping  the  conclusion.  Prices  have,  in  the 
main,  been  governed  by  supply  and  demand.  Speculation  has 
made  the  public  buyers  and  held  prices  somewhat  higher  than 


39 

they  would  otherwise  have  been.  At  times  speculation  may 
have  depressed  prices.  But  the  average  tells  the  story.  The 
laws  of  supply  and  demand  have  governed.  How  could  it  be 
otherwise  when  you  consider  the  thousands  of  buyers  ?  Last 
year  was  a  dull  year  for  the  business,  and  yet  twenty-seven 
hundred  millions  of  barrels  of  oil  were  sold  on  'Change. 

For  many  years  this  was  not  understood  or  admitted  by  oil 
producers.  The  fact  of  over-production  was  denied  and  the 
whole  cause  of  diminution  in  price  charged  to  the  Standard.  In 
1878  and  1879,  when  the  Bradford  region  became  so  prominent 
and  stock  began  to  accumulate  at  the  rate  of  six  or  eight  million 
barrels  per  year,  the  Pipe  Line  Company  served  notice  that  it 
could  not  take  care  of  this  accumulation.  Producers  claimed, 
that  being  a  Storage  Company  it  must  do  it.  Tanks  could  not 
be  erected  rapidly  enough  and  oil  ran  upon  the  ground.  This 
caused  such  intense  excitement  that  riot  was  imminent.  Secret 
associations  were  formed,  masked  men  paraded  at  midnight, 
death  and  destruction  were  threatened.  The  wildest  stories  were 
believed,  such  as  that  the  tanks  were  not  filled,  and  that  the  story 
of  over-production  was  a  Standard  lie,  invented  for  the  purpose 
of  enabling  it  to  purchase  cheap  oil.  At  length  the  Standard 
was  forced  to  enter  into  an  agreement  to  erect  sufficient  tankage 
to  take  care  of  all  oil  produced,  and  it  thereafter  did  so,  notwith- 
standing the  production  for  a  time  equaled  one  hundred  thousand 
barrels  per  day. 

To-day  the  principal  thing  for  which  the  oil  producer  blames 
the  Standard  is  that  it  erected  this  tankage  and  saved  this  surplus 
which  sits  like  an  incubus  upon  his  market.  All  now  admit 
that  over  production  caused  all  the  trouble.  A  late  paper  signed 
by  every  important  oil  producer  has  this  preamble: 

"  Whereas,  There  has  accumulated  in  the  past  ten  years  an 
excessive  stock  of  Crude  Petroleum  which  is  deteriorating  in 
quality,  and  a  portion  of  which  each  year  becomes  sediment, 
valueless  for  any  purpose,  and  the  carrying  of  which  excessive 
stock  requires  the  expenditure  of  vast  sums  annually  ;  And 
Whereas,  in  consequence  of  the  existence  of  said  stock  the  price 
of  Crude  Petroleum  has  for  the  past  year  been  largely  below  the 
cost  at  which  the  same  was  produced,  &c." 


40 

Thus  time  at  length  brings  truth  to  light.  The  oil  producer 
knows  and  admits  that  his  charges  against  the  Standard  in  1878 
and  many  subsequent  years  were  baseless  and  unjust.  But  the 
influence  of  those  unjust  charges  and  the  accompanying  public 
excitement  is  prejudicing  your  minds  to-day  as  the  waves  caused 
by  a  storm  at  sea  will  fret  distant  shores  long  after  the  storm  is 
over. 

It  is  useless  to  dwell  further  upon  the  current  allegations 
against  the  Standard.  The  majority  of  them  are  as  wild  and 
baseless  as  Arabian  Nights'  Tales. 

I  have  dwelt  at  such  length  upon  the  history  of  the  Standard 
because  it  is  always  referred  to  as  embodying  all  the  evils  of 
combinations  and  trusts.  And  yet  the  facts  show  that  it,  or 
some  similar  combination  of  persons  and  capital,  was  and  is 
essential  to  the  building  up  and  maintenance  of  the  American  oil 
trade  ;  that  its  destruction  would  be  the  destruction  of  that  trade; 
that  it  has  furnished  the  producer  a  cash  market  and  the  best 
possible  price  for  his  oil,  and  that  it  is  benefiting  the  public  by 
actual  reduction  in  cost  of  manufacture  and  prices  to  the  extent 
of  more  than  its  aggregated  capital  each  year.  Let  the  State  or 
National  Legislature  provide  a  better  mode  for  carrying  on  this 
business  if  they  can,  but  let  them  not  despoil  the  structure  until 
a  better  is  provided  to  take  its  place. 


University  of  California 

SOUTHERN  REGIONAL  LIBRARY  FACILITY 

305  De  Neve  Drive  -  Parking  Lot  17  •  Box  951388 

LOS  ANGELES,  CALIFORNIA  90095-1388 

Return  this  material  to  the  library  from  which  it  was  borrowed. 


41585 


tucqnrFGIONAL  LIBRARY  FACIUTV 
UC  SOUTHERN  RE6JOW^l>- 


AA    000  695  341     8 


